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Mortgage modification scam shows growing sophistication

Published: Thursday, February 13, 2014 at 9:58 p.m.

Last Modified: Thursday, February 13, 2014 at 9:58 p.m.

Phony loan modification offers are surfacing across Southwest Florida from scammers posing as Wells Fargo Bank officials, part of a scheme to collect thousands of dollars in up-front fees from unsuspecting borrowers.

The modifications sent through the mail include personal borrower information, official government seals and every single form that’s typically included in a legitimate loan alteration offer, according to documents obtained by the Herald-Tribune.

Each time a homeowner hoping for better loan terms returns the completed packet, the California group behind the scam collects thousands of dollars, Social Security numbers, bank accounts and other data that could be used in identity theft.

The loan modification scam is the latest in a series of foreclosure fraud schemes that prey on an overwhelming number of recession-battered homeowners in Florida who are fighting to hold on to their properties despite delinquent debt.

But foreclosure attorneys and law enforcement officials say this new Wells Fargo scam is the most sophisticated — and potentially widespread — effort they have ever seen.

“These homeowners are desperate,” said David Hicks, a Sarasota foreclosure attorney. “Many have probably tried to work out a loan modification with the bank on their own, and they were stymied. They wanted to believe something would happen — and they thought this was their last chance.

“But if it sounds too good to be true, it probably is.”

Experts also warn that, in an age of technological innovation, scams such as the one involving Wells Fargo will become ever easier to pull off because criminals can generate increasingly authentic-looking documents.

The package includes a traditional offer letter that outlines the proposed terms, a hardship affidavit, a standard loan application, a letter of credit authorization and a request for tax return transcripts.

There’s even an application for participation in the federal government’s Making Home Affordable program — with an official logo, a link to the U.S. Department of Housing and Urban Development’s website and the program’s actual 1-888 hotline phone number.

One page details new rules regarding federal Dodd-Frank banking regulations, while another has a replicated — but seemingly authentic — seal of the U.S. Treasury.

The forms request information like Social Security numbers, birthdates, cellphone numbers and other personal information that could open the door to ID theft.

They also ask for thousands of dollars in processing fees — along with three months of trial payments.

“There’s everything in here that comes with an initial loan modification,” said Joseph Heintz, a foreclosure and bankruptcy attorney in Port Charlotte. “Usually I can tell right away, from just the envelope alone, if it is a scam. But this is first-class stuff here. The documents are nearly flawless.”

Wells Fargo confirmed to the Herald-Tribune that the loan modification offers circulating around Southwest Florida are bogus.

A bank spokeswoman said the company has reached out to help those affected, offering one year of free identity protection.

“With the challenges in the housing market over the last few years, vulnerable homeowners have become prime targets for scam artists who attempt to take advantage of people through a wide array of mortgage scams,” Wells Fargo spokeswoman Kathy Harrison said in a statement. “Wells Fargo has continued its efforts to educate our customers about these scams.”

State and federal regulators said as a result of the Herald-Tribune’s reporting, they are now investigating the scam.

In a package sent recentloy to one North Port homeowner who asked not to be identified, the faux documentation proposed reducing the borrower’s principal balance from $149,143 to $128,552, under a lower 2.125 percent fixed interest rate.

The deal, had it been authentic, would have reduced the struggling owner’s payment by nearly $275 a month.

The offer letter included the official loan number for the original Wells Fargo mortgage, the correct terms of that delinquent note, and the precise amount past due. It even accurately detailed the customer’s gross monthly household income, as provided to the bank.

The offer was accompanied by escrow instructions for the borrower to send a $2,169 “reinstatement fee” via FedEx or UPS only to “Account Services” at 4790 Irvine Blvd., Suite 105-422, Irvine, Calif.

That address is for a P.O. box at a UPS store. It is not tied to an official Well Fargo branch or any payment processing center.

The escrow letter spells out directions for how the North Port homeowners should mail their $812.24 payment for the following three months to that same address — again by FedEx or UPS only.

The fraudulent offers directs borrowers to make checks out to “Trust Services.” The notice even asks borrowers to put their last name and case number in the memo section of the check.

Heintz said he has had three area clients come to him with the same falsified Wells Fargo offer in the past two weeks.

The veteran foreclosure attorney was almost ready to send one back until his paralegal realized the return address on the forms didn’t match what the firm had on file for Wells Fargo. The bank quickly confirmed the offer was not real.

Loan modification scams have grown steadily since the $25 billion National Mortgage Settlement was signed in early 2012, which forced some the largest lenders in the county — including Wells Fargo — to approve more principal reductions.

Other fraud schemes attempting to copycat state and national foreclosure relief efforts have similarly reaped hundreds of thousands of dollars from struggling homeowners.

The scheme has become more rampant as the housing crisis has worsened. In Florida alone, there were more than 253,000 pending foreclosure cases statewide as of Dec. 31, according to the Florida Courts Administrator.

The proliferation of the Internet, with its vast access potential, has compounded the threat, officials say.

“Some scams can be attributed to economics for sure, but scams targeting vulnerable people and their money are always out there,” said Lt. Charlie Thorpe, with the Sarasota County Sheriff’s Intelligence Unit.

“The Internet has been the biggest boon to the issue. If you’re on the Internet, you shouldn’t be surprised any longer on how easy it is for people with some research skills and a few dollars to find out things about you.”

Law enforcement officials say the goal of these scammers is usually to collect lofty upfront fees, and then disappear.

But most legitimate loan modifications — including all HUD-certified programs — do not involve any up-front costs.

“Because it’s not hard to access information, this type of scam can be pretty simple,” said J Scanlan, special agent supervisor for the Florida Department of Law Enforcement in Sarasota. “You have a computer, a printer, and you can make out the documents.”

In wake of the foreclosure crisis, Florida Attorney General Pam Bondi introduced new rules that made it illegal for anyone to solicit a homeowner in foreclosure.

These scams also can violate federal conspiracy and mail fraud laws — especially if they cross state lines or involve a federally insured lender.

In this case, HUD could pursue criminal prosecution through the Inspector General’s Office for fraudulently using the department’s name or logo without authorization, the agency said.

They advise borrowers in foreclosure to never give personal information over the phone or via email, research the company that they will be working with and contact their lender immediately before signing any documents.

“We tell people, when they get these things in the mail, they should never pay any upfront fees,” said Jerry Brown, a spokesman for HUD. “If there’s ever any question, you should always call a local HUD-counselor, who can walk you through it at no cost.”

<p>Phony loan modification offers are surfacing across Southwest Florida from scammers posing as Wells Fargo Bank officials, part of a scheme to collect thousands of dollars in up-front fees from unsuspecting borrowers.</p><p>The modifications sent through the mail include personal borrower information, official government seals and every single form that's typically included in a legitimate loan alteration offer, according to documents obtained by the Herald-Tribune.</p><p>Each time a homeowner hoping for better loan terms returns the completed packet, the California group behind the scam collects thousands of dollars, Social Security numbers, bank accounts and other data that could be used in identity theft.</p><p>The loan modification scam is the latest in a series of foreclosure fraud schemes that prey on an overwhelming number of recession-battered homeowners in Florida who are fighting to hold on to their properties despite delinquent debt.</p><p>But foreclosure attorneys and law enforcement officials say this new Wells Fargo scam is the most sophisticated — and potentially widespread — effort they have ever seen.</p><p>“These homeowners are desperate,” said David Hicks, a Sarasota foreclosure attorney. “Many have probably tried to work out a loan modification with the bank on their own, and they were stymied. They wanted to believe something would happen — and they thought this was their last chance.</p><p>“But if it sounds too good to be true, it probably is.”</p><p>Experts also warn that, in an age of technological innovation, scams such as the one involving Wells Fargo will become ever easier to pull off because criminals can generate increasingly authentic-looking documents.</p><p>The latest bank scam begins with someone trolling through online court records to find homeowners in foreclosure. From there, names, addresses and detailed loan information are collected. The organization then sends a loan modification offer via FedEx.</p><p>The package includes a traditional offer letter that outlines the proposed terms, a hardship affidavit, a standard loan application, a letter of credit authorization and a request for tax return transcripts.</p><p>There's even an application for participation in the federal government's Making Home Affordable program — with an official logo, a link to the U.S. Department of Housing and Urban Development's website and the program's actual 1-888 hotline phone number.</p><p>One page details new rules regarding federal Dodd-Frank banking regulations, while another has a replicated — but seemingly authentic — seal of the U.S. Treasury.</p><p>The forms request information like Social Security numbers, birthdates, cellphone numbers and other personal information that could open the door to ID theft.</p><p>They also ask for thousands of dollars in processing fees — along with three months of trial payments.</p><p>“There's everything in here that comes with an initial loan modification,” said Joseph Heintz, a foreclosure and bankruptcy attorney in Port Charlotte. “Usually I can tell right away, from just the envelope alone, if it is a scam. But this is first-class stuff here. The documents are nearly flawless.”</p><p>Wells Fargo confirmed to the Herald-Tribune that the loan modification offers circulating around Southwest Florida are bogus.</p><p>A bank spokeswoman said the company has reached out to help those affected, offering one year of free identity protection.</p><p>“With the challenges in the housing market over the last few years, vulnerable homeowners have become prime targets for scam artists who attempt to take advantage of people through a wide array of mortgage scams,” Wells Fargo spokeswoman Kathy Harrison said in a statement. “Wells Fargo has continued its efforts to educate our customers about these scams.”</p><p>State and federal regulators said as a result of the Herald-Tribune's reporting, they are now investigating the scam.</p><p>In a package sent recentloy to one North Port homeowner who asked not to be identified, the faux documentation proposed reducing the borrower's principal balance from $149,143 to $128,552, under a lower 2.125 percent fixed interest rate.</p><p>The deal, had it been authentic, would have reduced the struggling owner's payment by nearly $275 a month.</p><p>The offer letter included the official loan number for the original Wells Fargo mortgage, the correct terms of that delinquent note, and the precise amount past due. It even accurately detailed the customer's gross monthly household income, as provided to the bank.</p><p>The offer was accompanied by escrow instructions for the borrower to send a $2,169 “reinstatement fee” via FedEx or UPS only to “Account Services” at 4790 Irvine Blvd., Suite 105-422, Irvine, Calif.</p><p>That address is for a P.O. box at a UPS store. It is not tied to an official Well Fargo branch or any payment processing center.</p><p>The escrow letter spells out directions for how the North Port homeowners should mail their $812.24 payment for the following three months to that same address — again by FedEx or UPS only.</p><p>The fraudulent offers directs borrowers to make checks out to “Trust Services.” The notice even asks borrowers to put their last name and case number in the memo section of the check.</p><p>Heintz said he has had three area clients come to him with the same falsified Wells Fargo offer in the past two weeks.</p><p>The veteran foreclosure attorney was almost ready to send one back until his paralegal realized the return address on the forms didn't match what the firm had on file for Wells Fargo. The bank quickly confirmed the offer was not real.</p><p>Loan modification scams have grown steadily since the $25 billion National Mortgage Settlement was signed in early 2012, which forced some the largest lenders in the county — including Wells Fargo — to approve more principal reductions.</p><p>Other fraud schemes attempting to copycat state and national foreclosure relief efforts have similarly reaped hundreds of thousands of dollars from struggling homeowners.</p><p>The scheme has become more rampant as the housing crisis has worsened. In Florida alone, there were more than 253,000 pending foreclosure cases statewide as of Dec. 31, according to the Florida Courts Administrator.</p><p>The proliferation of the Internet, with its vast access potential, has compounded the threat, officials say.</p><p>“Some scams can be attributed to economics for sure, but scams targeting vulnerable people and their money are always out there,” said Lt. Charlie Thorpe, with the Sarasota County Sheriff's Intelligence Unit.</p><p>“The Internet has been the biggest boon to the issue. If you're on the Internet, you shouldn't be surprised any longer on how easy it is for people with some research skills and a few dollars to find out things about you.”</p><p>Law enforcement officials say the goal of these scammers is usually to collect lofty upfront fees, and then disappear.</p><p>But most legitimate loan modifications — including all HUD-certified programs — do not involve any up-front costs.</p><p>“Because it's not hard to access information, this type of scam can be pretty simple,” said J Scanlan, special agent supervisor for the Florida Department of Law Enforcement in Sarasota. “You have a computer, a printer, and you can make out the documents.”</p><p>In wake of the foreclosure crisis, Florida Attorney General Pam Bondi introduced new rules that made it illegal for anyone to solicit a homeowner in foreclosure.</p><p>These scams also can violate federal conspiracy and mail fraud laws — especially if they cross state lines or involve a federally insured lender.</p><p>In this case, HUD could pursue criminal prosecution through the Inspector General's Office for fraudulently using the department's name or logo without authorization, the agency said.</p><p>Officials say homeowners should always be wary of unsolicited loan modification offers, especially if up-front processing fees are requested.</p><p>They advise borrowers in foreclosure to never give personal information over the phone or via email, research the company that they will be working with and contact their lender immediately before signing any documents.</p><p>“We tell people, when they get these things in the mail, they should never pay any upfront fees,” said Jerry Brown, a spokesman for HUD. “If there's ever any question, you should always call a local HUD-counselor, who can walk you through it at no cost.”</p>